Franchises

EPL club Liverpool Owner John Henry said in an open letter that “there had been mistakes during Fenway Sports Group’s ‘difficult’ two years of ownership” and the company “overspent on inflated transfer fees and unrealistic wages,” according to Ian Herbert of the London INDEPENDENT. Henry said a turnaround "will not happen overnight." Henry “did not reveal in his letter who in the Liverpool hierarchy decided” that the proposed US$11.1M price to acquire Fulham MF Clint Dempsey was too high, “though he did hint at FSG's aversion to signing older players.” Henry: "Our ambitions do not lie in cementing a mid-table place with expensive, short-term quick fixes that will only contribute for a couple of years.” Henry’s statement “did bear out the sense of FSG as owners with an enlightened financial philosophy to ‘buy prudently and cleverly and never again waste resources on inflated transfer fees and unrealistic wages.’” The letter also “provided the latest of many Henry communications about the club's determination to adhere to UEFA's Financial Fair Play (FFP) regime.” Herbert wrote, “The owners are willing to accept a mid-table position for Liverpool this season, as the price for adhering to their philosophy” (London INDEPENDENT, 9/4).

GUARDED PESSIMISM: The GUARDIAN’s Andy Hunter noted that Henry “reiterated claims that FSG are still dealing with the fallout from the near-ruinous Liverpool ownership of Tom Hicks and George Gillett.” But Henry “accepts that FSG has itself erred in the transfer market, sanctioning a [US$191M] outlay on new players under the former manager Kenny Dalglish and the ex-director of football Damien Comolli only to sack Dalglish after one full season in charge” (GUARDIAN, 9/3). The GUARDIAN’s David Conn wrote Henry and FSG are “not even concerned about finishing as high as mid-table this season, as long as the right youngsters have been signed for the future.” Conn wrote there is "little doubt that Henry was referring to paying an outlandish" US$55.7M for Andy Carroll in Henry's "first flush of arrival into soccer in January 2011” by referring to "our own mistakes" in the letter. Now, Henry “apparently acknowledges that the Moneyball men paid way too much.” Much of the recently closed transfer window “was spent undoing the deals FSG did during its honeymoon period.” While FSG “may not want profit in terms of taking cash out” of the team, “without question it is motivated by wanting the value of the club, its property, to increase.” Henry and FSG co-Chair Tom Werner “resolved they were not going to get burned again in football which, lifelong baseball fans, they knew nothing about when they took over.” These “clever men from Boston … are still on a learning curve” (GUARDIAN, 9/3). In N.Y., Rob Hughes wrote Henry's letter was designed to "to bridge an ocean of distance between running a baseball franchise in New England and one of the oldest soccer teams in dear old England." But Liverpool fans "question whether the owners across the Pond really know the peculiar aspects of team building in soccer." Hughes: "It is clear that the learning process that Henry admits to, and that his predecessors Hicks and Gillett never mastered, has some ruinous consequences" (N.Y. TIMES, 9/4).

ZERO-SUM GAME: The WALL STREET JOURNAL’s Gabriele Marcotti wrote nearly two years after FSG’s takeover “it might be harsh to suggest that Liverpool still finds itself at square one, but progress has been slower than expected.” One of the bigger concerns “ought to be the 180-degree turn the owners made at the start of the summer, when they abandoned the two-pronged model they had introduced for a structure which concentrated power with the new manager, Brendan Rodgers.” Having “chosen the ‘coach-plus-general manager’ model less than two years ago, then abandoning it entirely -- rather than simply changing the personnel -- raises questions about the clarity of FSG's thinking.” Marcotti: “It is impossible to know whether the absence of a director of football directly led to Liverpool's somewhat puzzling transfer activity. But what appears clear is that, having ditched one model for another in little more than 18 months, it's just about Year Zero once again at Anfield” (WALL STREET JOURNAL, 9/3).

EPL club Manchester United's stock price "will increase to $17 over the next year, $3 above the price at which the shares started trading last month," according analyst reports cited by Tariq Panja of BLOOMBERG NEWS. At least "five securities firms began coverage" of the club yesterday, including Jefferies Group, Credit Suisse, JPMorgan Chase, Deutsche Bank and Nomura Holdings. Jefferies' $20 price target was the highest among the group, while Nomura's $13 projection was the lowest. Jefferies analyst Randal Konik said, "Live sports programing is a winner in the new media landscape. With football the No. 1 sport in the world and Manchester United the most popular team, the company is poised to benefit immensely." However, Nomura analyst Michael Nathanson noted, "While there is much to like about the company's revenue model and near-term growth prospects, we remain cautious about the potential of greater-than-expected player cost inflation and valuation" (BLOOMBERG NEWS, 9/4).

QUESTIONS LINGER: The WALL STREET JOURNAL's Alexandra Scaggs noted analysts pointed out that ManU fans "are more likely to watch a team's games and buy its tickets if it wins, making success a key driver of revenue." Credit Suisse analyst Spencer Wang said, "On-field performance is a swing factor." Bank of America Merill Lynch analyst Bryan Goldberg said that "profit could rise 15% if the team wins a championship but could fall 9% if it does not" (WALL STREET JOURNAL, 9/4).

With Red Sox President & CEO Larry Lucchino and co-Chairs John Henry and Tom Werner "popping in during this West Coast swing, the Red Sox ownership certainly seems to be doing its due diligence on the post-trade clubhouse culture front," according to Michael Silverman of the BOSTON HERALD. For a team that is "entirely focused" on next season, its "unwillingness to say that [manager Bobby] Valentine should be included in that picture is telling." Red Sox GM Ben Cherington "agrees with the notion that Valentine's unendorsed status will linger until it is clarified." Cherington said, "It’s been talked about and we all have choices every day and the choice that we made was to try to make sure we finish 2012 (the) best way possible. I understand the question, it’s going to continue to be asked" (BOSTON HERALD, 9/4). Cherington said that suggestions that Valentine "was in trouble because both the owner and the general manager were in town needed some context." Cherington: "I had this on my calendar for a month. John was (already) on the West Coast" (ESPNBOSTON.com, 9/3). In Boston, Scott Lauber noted Henry "only embarked on a one-day 'fact-finding' visit that included breakfast with the embattled manager." Neither Valentine nor Henry "divulged specifics of their breakfast." Valentine said, “What do you think we talked about? Art? Liverpool? We talked about baseball and our team, obviously. Things that he’s concerned about, and things that I deal with.” Lauber noted Valentine’s "way of dealing with the Sox’ issues appears to be at odds with the rest of the organization, a fact acknowledged by Cherington" (BOSTON HERALD, 9/4).

OWNERSHIP SHOULDERING BLAME: In Boston, Nick Cafardo wrote it doesn’t appear Henry, Werner and Lucchino "are going to sit on the sideline in rebuilding the team this offseason." The "general feeling of Henry and Cherington is yes, the roster is challenging, but they expected more." Henry will "ask Cherington to seek value free agents, make sound baseball trades." The owners "will be more involved in the transactions, and Cherington will not have the carte blanche financially that [former GM] Theo Epstein did." One of the reasons "for the visibility of the owners lately is because they felt they allowed last September to get out of hand, trusting Epstein to straighten out some of the issues the team faced before and during its great collapse" (BOSTON GLOBE, 9/4). Also in Boston, Peter Abraham noted Werner "opened up about this fractured season and his hopes for the future." Werner said, "I can talk about it as a fan and as an owner. We suffer as much, if not more, than anybody." He added, "Nothing is more important to us than winning and giving our fans the sense that we desperately want to win." Abraham noted Werner "was expansive in his praise" for Cherington. Werner said, "We give him high marks in how he's dealt with the challenges this season, and he's going to be with us for a long time" (BOSTON GLOBE, 9/2).

TRUST ISSUES: YAHOO SPORTS' Jeff Passan noted among the Red Sox brass, Henry "has long earned the most respect from players because he is a self-made billionaire who cavorts on yachts and carries himself with a charming air of nerd-made-good." Still, he is "deluding himself if he believes a couple of conversations are going to provide clarity on what ails his baseball team." Red Sox players "do not trust" the ownership. They "see the owners' box as a den of lies, leaks and resentment." For a franchise "with a history of colossal blunders," the hiring of Valentine "joins their Mount Rushmore of whammies." If Valentine has "been good for anything, it's allowing Boston to hit the reset button without a scintilla of public bellyaching" (SPORTS.YAHOO.com, 9/4). In Providence, Brian MacPherson wrote that by "putting Valentine out of his misery, the Red Sox would in effect be eating the money on that contract." Fortunately, they "just cleared $260 million in future payroll" and can "probably afford to do what they need to do with Valentine" (PROVIDENCE JOURNAL, 9/3). The BOSTON HERALD's Silverman wrote the "here and now is a painful place to be for the Red Sox." Henry said, "Given where we are right now, it’s a tall order to win the division next year. But we have to do everything we can to contend without repeating errors of the past -- something we are determined to avoid. We strayed from our core philosophy over the past few years and have paid a terrible price for that” (BOSTON HERALD, 9/3).

BRING BACK BILL:The BOSTON HERALD's Silverman in a separate piece wrote Henry "flew here, in part, to make sure the team does not give up in the final month of the season." Henry said that it is "important for him to see things for himself, and ask his own questions of the people who play and work for his team." He is "deeply concerned with how the team has turned of late and talked yesterday about pulling statistician/guru Bill James back into the equation in a bigger way." Henry in an e-mail said, “One of (the) biggest issues we’ve had is that Bill James was a great resource for us but fell out of favor over the last few years for reasons I really don’t understand. We’ve gotten him more involved recently in the central process and that will help greatly" (BOSTON HERALD, 9/3).